05:23 pm - Past present and futureI don't think it makes sense to say that the world as a whole has run out of money, so we need to spend less. That's like saying people have to stop getting married because we have run out of marriage licenses. Money is a medium, not a fuel. It's just a social convention. You can't use it all up in 2008 and have none left by 2012. If the same products are being made then nothing real has run out. And if fewer products are being made because workers are sitting around unemployed, then the shortages are entirely man made.

What I think has happened is that wages and spending power are the same thing. It's the same figure, with two names. Businesses want to keep wages down. But they want to operate in an economy where spending power is up. That's a tension at the heart of capitalism. About thirty years ago, businesses got the upper hand over workers, and started to cut back on wages. In theory the result would have been a collapse of spending, but for a while the cracks were papered over by easy credit. Part of your spending this year is taken against your wages next year. But this can't go on for ever. And so we see. For example, this year the number of cars bought in the UK has plummeted. It's all going wrong for capitalism.

I think there are only two ways this can resolve. One is for workers - perhaps globally - to get more leverage, and regain some spending power like before. That might happen as a kind of levelling out over the whole world, so people like us might end up quite a lot less affluent. But overall it would be OK. I am thinking that perhaps most people wouldn't be able to buy cars for example, but capitalists could sell other things like public transport. Cheap laptops, all the stuff.

The other way I think is that manufacturers might re-align to start catering for the small class of ultra-rich. That would be a strange world wouldn't it? All of us working to make really expensive stuff we never can buy, and provide services to a super-class we can never enter. A bit like Neuromancer.

Another thing that's happened is that a massive amount of money has been sucked out of the general economy into the financial sector -- one recent number I read, but can't find right now said that 40% of the economy was bound up in the financial services sector whereas before the 1929 crash and subsequent depression, it was only 15%.

Money in the financial sector doesn't produce anything - it just gets concentrated into fewer and fewer hands and is used to make more money by sucking it out of the economy.

If almost half the economy is dedicated to this money go-round, then there's very little left for manufacturing (which actually value), R&D (which makes future value), let alone agriculture, mining and all the other traditional make-value type industries.

I remember reading somewhere that back in the day, the founders of Rolls-Royce, although they didn't expect their workers to all drive their cars, did believe it should be possible for the workers to save up enough to buy one by the time they retired. (Though I might have that wrong).

Yes. I think that's true, although ultimately the money is meaningless, the sector annexes the spending power which it represents. Either that changes, and the spending power get dispersed back into the community, or we trip over into a new kind of world where a small group of people consume all the products.

It's not really a new kind of world. It's more a return to an old one; as old as cities and governments, where the bulk of the population gets enough to meet their most basic needs and an elite creams off the rest for conspicuous consumption of various kinds. Of course that could never happen in a democracy which is why we no longer have democracies.

I don't know about Rolls-Royce, which was always a luxury car, but Henry Ford's "five-dollar day" was expressly adopted (to the disgust of other capitalists who then had to match the wage) so that factory workers could buy cars.

Resources are being spent foolishly, which will cause trouble in future. EG building fancy houses that are now vacant, instead of repairing or replacing needed buildings. WAsting oil when we should be building renewable power stuff.

I keep saying 'I agree' to everyone. Yes, that's what I think too. There really is a second problem - our resources really are going to run out - but that isn't the cause of this recession. I sometimes wonder whether the vague emotional unease people have about the future resource problem is projected onto this imaginary money-problem.

I'm sure all that's true. But what I'm talking about is, spending carpenters' current energy and tools and supplies, on building fancy new MacMansions, while the post office and hospital and bridges are getting more and more run down. Soon the bridges will collapse and there will not be time to repair everything at once (and a lot of materials will be stuck in those vacant MacMansions).

I think that these real, physical problems, 'deferred maintenance', are being hidden by all the talk about money and debt.

I think you need to factor in anticipated earnings, but I'm not sure how.

People who think their jobs are safe (and their partners' jobs) seem to borrow, and spend, differently to those whose jobs are under threat.

So you can have two groups of workers, paid the same, one confident enough to borrow, confident enough to spend their wages, and another which worries about their borrowings, and diverts money from expenditure into paying off credit, or diverts money from expenditure into savings, anticipating reduced/no wages in future.

I agree completely. Apart from the last bit. Isn't the most likely thing that we will muddle through for a couple of years, maybe make a few steps in the direction of your first solution, and then all just forget and start a new credit bubble?

I wish that woudl happen, in a way, because it woudl give us time to work something out. That's why I think social democracy is the best solution for capitalism - if things just chugged along, with welfare and the NHS in place, and we slowly drifted back to a more sustainable market. But it seems to me that the people in charge are hell-bent against letting that happen.

The cheap resources will run out soonish, and that's a real problem, but I don't think the current recession is about resources running out. In fact I think that worrying about money and finance and credit is taking political attention away from the things that really matter, like establishing renewable energy and better farming practices.